HR and Business Ethics

Episode 108: Should HR be the conscience of the organisation? In the wake of the Volkswagen emissions scandal, this roundtable explores the role HR should play in developing and enforcing business ethics in their organisation.

Date: 01/12/15 Duration: 00:16:59

In today’s business landscape HR professionals are seeking greater business credibility, greater influence and greater impact in their organisations. But what role does HR play in promoting and/or enforcing ethical responsibility in business?

Recent high-profile scandals at Volkswagen, Tesco and Amazon have highlighted the importance of organisational culture and leadership, not to mention the risks of ignoring them. In this roundtable discussion Philippa Foster Back CBE, Director of the Institute of Business Ethics, David Jackson, Associate Director of HR at Manchester Metropolitan University and Laura Harrison, Director of People and Strategy at CIPD, discuss the changing role of HR and how ethical responsibility and business credibility can be balanced and incorporated into that role.

Should HR be the ‘conscience’ of an organisation? Join in the discussion on Twitter @CIPD using the hashtag #cipdpodcasts.

Philippa Lamb: So we’re recording this podcast in the week that Volkswagen CEO in the US, Michael Horn appeared before Congress and admitted that his company had rigged 11 million American cars to cheat diesel emissions testing. His British counterpart, Paul Willis, faced the Transport Select Committee and as expected a tough grilling by MPs.

Now VW deny a corporate conspiracy and point the finger at a handful of rogue employees. But even if that does prove to have been the case the scandal, and others like it, raises crucial questions for organisations of every sort about business ethics and who should take responsibility for embedding and monitoring ethical business behaviour.

VW of course is not alone; Walmart, Tesco and Amazon have all been hit by scandals, variously involving accounting irregularities, bribery, and/or harsh treatment of employees.

And this issue isn’t limited to global players. Responsibility can be hard to pin down but HR must have a role and today we’re discussing what that role is and how HR should play it.

Now with me I have Philippa Foster Back, she's director of the Institute of Business Ethics; David Jackson is now associate director HR at Manchester Metropolitan University, he worked directly for three HR directors general during his time at the Department for Work and Pensions; and Laura Harrison is CIPD’s own director People and Strategy. Thanks very much for joining us.

Before we turn to wider questions I would be very fascinated to hear your take, all of you, on the Volkswagen situation. It was a surprise wasn’t it? Philippa

Philippa Foster Back: Yes indeed I think it was a surprise but I'm always taken by the answer that the corporate tends to have ‘It was a few bad apples’. They never think to think and look at whether or not it’s a rotten barrel. And I think anything like this actually speaks to the culture of the organisation, obviously it perhaps was one of fear: people couldn’t speak up and actually say, presumably, “Our diesel vehicles will not meet US emission standards,” and not come clean. They had to find a work around. So I was very surprised.

PL: David.

David Jackson: I think the fact it’s happened somewhere like Volkswagen which is, or was, such a reputable brand, such a high performer on the world stage, is interesting because I think it reminds us again how hard it is for employees within organisations to perhaps challenge, to question behaviours or decisions. And I think we have to go into this, and our response to it, accepting it is very difficult and what can we, as a profession, do to help?

PL: Yeah I mean Laura it must be about the culture?

Laura Harrison: I think it is about the culture and it’s surprising and yet in a way unsurprising organisations have become incredibly big, very complex, very messy and if people on the ground or working with the systems or at the coalface or with the customer don't have a route through to the decision makers, have no means by which to express their concerns then I suppose in a way it’s not that surprising.

PL: Obviously ethical business conduct I mean that covers governance, it’s culture, as we said, it’s behaviour. I mean what role do you think HR should play in this?

LH: We've been looking at this a lot recently in the CIPD and when we started the conversation about principles and ethics in the HR profession we’d often come across the conversation where people would say, “I am interested in ethics but I actually work in a commercial environment so can I be ethical? Is there a conflict there?” and I suppose we sort of play that back in the context of professionalism I think, so you wouldn’t speak to the CFO I don't think in a large corporation and say, “Well I don't really expect you to be ethical because you’re commercial, we don't expect that.” So I think ethics have a significant role to play in HR, building that sort of ethical competence, that sort of framework for decision making but I think it’s perhaps not something we’ve paid enough attention to recently, partly because of the HR profession’s desire to prove itself as a viable commercial partner in the business.

PL: Yes I mean there must be a tension there mustn’t there because as you say this has been a big imperative for HR as a profession but there is this very real, very potential conflict around business targets and culture and how on earth do you deal with both? Where should your priority lie?

LH: And I suppose there's two different ways of looking at it isn’t there, one is the more best practice way of looking at it I think, so the CIPD sits on swathes of research that demonstrates that greater productivity comes from more engaged cultures, organisations where the people are led better, more effectively, where they have more voice. So if you want to take a sort of purely commercial slant on it and you want to look at the long term sustainability of businesses then it seems as though the evidence tells us that you've got to look at the culture. Another way of looking at it is a much more humanistic way, a much more human centred way which is actually well are people a means to your business end or are people and their wellbeing an end in itself? If you look at most corporates and how they talk about their purpose many will say they exist to serve multiple stakeholders, so there's a little bit I think in the HR profession’s responsibility to hold businesses to that responsibility, to all its stakeholders, not just the shareholders or owners or in a very short term sense.

PL: But if we’re saying organisations have to have a conscience even if they’re overtly commercial where should that conscience lie?

DJ: I think if you expect that conscience to lie in a specific place in the organisation we’ve probably missed the point. This needs to be across the whole organisation. So the question for me is what role does HR play in helping to get to a position in which people can talk about those issues in a more comfortable way so people learn how to challenge and discuss and accept that this is complex. And if HR gets things wrong what it sometimes does is try and simplify very, very complex issues into procedures, into rules, into very structured, neat models that don't reflect the complexities of modern business and challenges.

PL: From what you’re saying it doesn’t sound like you think HR has played this role very well to date?

DJ: I don't think HR has played the role particularly well but I think expectations are changing to be fair and the function has to change with it. I think if you look at a lot of what HR has been seen to be valuable in, in terms of providing processes which are fair, and they’re fair because the rules are applied to people in the same way in different situations, the test when you’re thinking like that is have we followed what we’d normally do? Have we followed the rules? What you’re not thinking about is the full complexity and all the issues in the current situation, in the current debate, and I think HR has perhaps narrowed where it should have been opening up conversations.

PL: And Philippa you deal with organisation of all sorts, obviously you’re not just dealing with HR directors you’re dealing with all sorts of board members and CEOs, what is the sense you get of where they feel this responsibility lies or what they need to be doing?

PFB: Most of the large companies have actually got this separate function that looks at ethics, it might be tied with compliance, it might be separate but I think, and throw back the challenge because I see no tension at all with commerciality at all, our strapline is actually ‘doing business ethically makes for better business.’ And that is proven on every level, as Laura was saying, but it’s actually getting it into the business framework, into the mindset and the DNA of the people who are doing the business.

PL: But if we set aside the question of legality and compliance there must be times in a commercial organisation where there is a tension between something that's strictly ethical and something that will be to the commercial benefit of the organisation?

PFB: That will happen every day and the organisation has to make the choices. There'll be direction from the board on the bigger choices about, you know, do we offshore, do we outsource? All of those, our marketing campaigns what are they going to look like.

PL: Public behaviour?

PFB: Yes. But there's day to day behaviour obviously, interpersonal behaviour, if there's bullying or harassment of any sort. So that goes on all the time and that is where individuals need to be given some guidance, usually around a code of ethics, so it’s a framework that's produced, so that they know what to do if they’re facing these dilemmas. But even more important is actually know who to speak to. If you can't speak to your manager who do I speak to?

PL: I mean there's a difficulty there, as you say a lot of large organisations have a function which is about ethics but whoever is in charge of ethics is a paid employee whose remuneration is set by the board and I think we saw that with the Walmart scandal in Mexico didn’t we, around bribery, that there was no trust in the ethics function because people took the view they weren't about to blow the whistle to someone who was paid by the board who presumably had a role to play in the problem in the first place. So how do you get around that?

PFB: Well the ethics function is usually the function that manages the process. Every individual in an organisation is responsible for ethics, usually led from the board and particularly the CEO of course, and that’s when it becomes about example, do as I do or do as I say. So everybody has a responsibility.

PL: Is there a big role here around short term business objectives?

LH: For sure. You spoke of tensions earlier. I mean obviously there's tensions between pleasing different stakeholders, so be it owners, customers, and your people, critically, for the HR function, but there's also tension in short term and long term and that's clearly particularly difficult for public companies. And I think this is where bringing data and insight to the table is so important. And this is where HR has a significant role to play in showing that the role that the talents of the people in the organisation can play in taking the organisation through to long term objectives that supersede whatever it is you need to do in the next quarter.

PL: Yes because it’s the long term management of people, their expectations of how long they’re going to be with the organisation, where they’re going to be when they leave, I mean all this must play into those decisions.

LH: And that is a challenge because historically where organisations have provided a degree of stability and identity that ability to deploy an idea of this is how we do things around here is easier when you look at the average tenure of a chief exec in the FTSE 100 being four to five years I suppose makes it a little bit more challenging to really build that sense of corporate identity and what’s right and what’s wrong and I suppose I would say this wouldn’t I because I'm here from the CIPD but I think that's where professions have a role to play. We all look for meaning, we all look for identity, we all want to be part of a tribe, and many of our ethical judgements come from that and so I think professions have a role to play in providing that stability which isn’t going to come from the organisation of the future and in fact doesn’t now.

PL: I mean David it’s important to remember isn’t it that we’ve been talking about heavy hitters, Amazon and Tesco and the rest, but these issues it is very much about day to day, what sort of dilemmas are people encountering?

DJ: I think the most common dilemma people are encountering is whether or not we challenge when we feel uncomfortable. There are all sorts of pressures on people, whether that's job security, whether it’s career prospects, how long we are in an organisation, and are we comfortable being a voice around a leadership table that will dissent?

PL: I mean high paid senior people can make decisions in a slightly different world to the rest of the people down the tree, I know Philippa you have got a very interesting app that you’ve launched which is for everyone, isn’t it, who faces this sort of decision-making. Tell us a bit about that?

PFB: Yes it’s called the ‘Say No Toolkit’, it’s a giant decision tree, it came in and can be considered as part of the adequate procedures under the UK Bribery Act. It’s free to download for anybody to use, just www.saynotoolkit.net. It’s very simple but it takes you through the whole series of questions and at the end will either say, no, say yes, ask or report.

PL: And it brings us to the question of accountability doesn’t? Without wishing to get too deep into finger pointing there is the question isn’t there, and I think particularly since the banking crisis a lot of discussion about who has been held accountable? And we haven’t seen many individuals held accountable for a lot of the scandals we’ve been seeing in the news over the last five to eight years, should the finger be pointed at board level HR in future? If we’re saying, “This is where HR needs to lead,” does HR also carry the can?

LH: So I would say that HR doesn’t carry the can for specific corporate failures unless there are specific actions that the HR function has taken to cause that. But what I would say HR has to be accountable for is the development of healthy cultures, or healthy leadership and also, as David says, of surfacing where that isn’t working. And of course that’s reliant upon really understanding the organisation, so it’s reliant upon having a real commitment to the voice of employees in organisations. And again we’re into another tension because if you want to demonstrate that you serve the business at times that can mean that your primary stakeholder is of course your owners or shareholders, but if you’re not listening to the people in the organisation and it’s harder and harder to do that because of fragmentation and it’s not the way that trade unions operate, and every voice is individual, then you’re not really going to have that insight to deliver on that accountability.

PL: So we’re coming to the end of your time but I do, I think, want to ask just some practical advice really for HRs listening to this at whatever level, I think we can assume the vast majority of people hearing this will not be HR directors, if they’re thinking they want to push towards taking greater ethical responsibility, towards moving to the sort of things we’ve been talking about what should they do?

LH: So where this really comes alive for me, and I've got a background working in HR, is in the day to day decisions that you’re making where life is messy and it doesn’t adhere with the policy. So we would have to have very, very long policies for people to be able to find the answer always in the policy. So if someone wants to take some time off to do something but it’s not strictly within say the time they’re allowed off during pre-maternity and the policy doesn’t give you the answer you've got to use your judgement and the first point I would say is to ask yourself why, what was that policy trying to effect in the first place? So forget about the rules ask yourself what the intention behind the rule was.

PL: The spirit of the rule?

LH: The spirit of the rules. And particularly it comes down to the idea of character, ask yourself what is the right thing to do here? What is the thing that makes me feel like I'm behaving like the best possible version of myself or the best possible version of a leader I've seen? Because that's something we can all build in ourselves. It’s a muscle that I think we don't talk about enough.

PL: David?

DJ: I think if you're operating at a senior level, so if you’re an HR director or perhaps you're a senior business partner in a leadership team the practical steps you can take are to help that team to learn how to debate and the challenge confidently, to open things up, to talk about really difficult issues, to get the team comfortable and to feel well-supported in taking a completely different view to the one the CEO has taken or seems to be the compelling commercial decision.

PL: Philippa?

PFB: Well I would actually take it back a stage further to the values of the organisation and I think actually framing what you've both said in the context of the values of the organisation to bring them alive for all members of staff so that they are actually being lived and they understand what these four or five words actually mean in reality when the rubber hits the road and being able to demonstrate that and to be able to do it, also to get the talk going, getting this open culture and discussion, just doing a few very simple, easy things like having small scenarios that could be used at the beginning of a team meeting, at the end of it what would you do? And so you open up the culture and the discussion point, that you were saying David, at the team level. So if something does come up then you know people will talk about it because they’re used to talking about these things. You've got to exercise the muscle as Laura was saying, and I think that is the most practical way and easy way of doing it without any cost, or ten minutes of people’s time.

PL: So less clinging to the rule book and more holding on to your principles.